State pensioners will face several new tax rules and changes after next Wednesday's Budget, with seven confirmed measures already set to take effect in the next tax year starting April 2027.
Former Chancellor Rachel Reeves announced several financial policies at last year's Budget, delaying their implementation until April 2027. This means next week's Budget, on October 28, precedes key pension rules already going ahead, limiting new Chancellor John Healey's ability to make further tweaks.
Triple Lock Boost and Tax Exemption
Despite the planned removal of the state pension triple lock in favour of a 'double lock' from 2030, the mechanism will stay in place for 2027, 2028, and 2029, as confirmed by Andy Burnham. The full new state pension will rise by another £489 in April 2027.
However, state pensioners with 'no other income' besides the state pension will not pay tax on their DWP payments, according to HM Treasury. This exemption kicks in from April 2027, when the triple lock increases the full new state pension above the £12,570 threshold.
Inheritance Tax and Cash ISA Changes
From April 2027, workplace and private pensions will become subject to Inheritance Tax, counting towards the £325,000 threshold (£500,000 including a main residence). This will affect more households when a loved one dies.
A special Cash ISA rule will also be introduced from April 2027. While Cash ISA limits will be slashed from £20,000 to £12,000, over-65s will receive an exemption allowing them to continue depositing £20,000 a year, avoiding reliance on long-term Stocks and Shares investing.
Other Confirmed Changes
Additional changes include adjustments to income tax bands and National Insurance contributions, which will affect pensioners with other income sources. The government has also confirmed changes to pension credit eligibility and winter fuel payments, though specific details remain under review.
These measures will be implemented in the next tax year, with the Budget expected to confirm the final details.
